Fiscal position continues to deteriorate (Apr Oct '99) - Views on News from Equitymaster

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  • Dec 1, 1999 - Fiscal position continues to deteriorate (Apr Oct '99)

Fiscal position continues to deteriorate (Apr Oct '99)

Dec 1, 1999

The central government's fiscal situation seems to be deteriorating with no end in sight. Certain reports have stated that in the seven-month period ending 31st October 1999, the fiscal deficit had already exceeded 72% of the targeted amount. The cause for the deficit has been the shortfall in revenue collections and an overshooting of expenditures. The tax and non-tax collections for the same period were 41.4% and 55.4% respectively. Although non-tax revenues seem to be in line with projections, they contribute to only a fraction of total revenues and hence the overall situation continues to remain worrisome.

It is not certain whether the proceeds generated by divesting holdings in public sector units have been clubbed with the non-tax revenues. The government has proposed to generate Rs 100 bn by this means. Needless to say, the government has been trailing in this aspect too.

On the expenditure side, concerns are emanating from the rise in crude oil prices that has implicitly increased the subsidy bill of the government. Other concerns pertain to the rise in non-plan expenditure as against the decline in plan expenditure. In order to control the overall deficit, the government seems to be compromising on plan expenditure and this could pose problems for the economy once the momentum builds up (for example, infrastructure may prove to be insufficient).

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